[Bumped to top of homepage, since there was so much discussion and it scrolled off so quickly. -ed.]
Today, specifically I’m talking about the estate tax and the 18 families that have spent ten years lobbying to save a combined 1 trillion dollars on their taxes. That’s trillion with a T. And that’s one trillion more in debt and deficit spending that you, I, the fence post, and our kids our going to have to come up with. If the repeal of the estate tax becomes final, we are talking about vesting over a third of this nations wealth in the hands of less than 1 percent of the population by the middle of this century. And a population that has never done anything to earn that money.
Anyway, I bring this up for two reasons. Congress is voting on the issue this week and Robe Rtreich did an interesting commentary about it on NPR today. Good analysis about to a recent report by United for a fair economy. View the press release. view the full report.
key quotes from the release:
In a massive public relations campaign, the families have also misled the country by giving the mistaken impression that the estate tax affects most Americans. In particular, they have used small businesses and family farms as poster children for repeal, saying that the estate tax destroys both of these groups. But just more than one-fourth of one percent of all estates will owe any estate taxes in 2006. And the American Farm Bureau, a member of the anti-estate tax coalition, was unable when asked by The New York Times to cite a single example of a family being forced to sell its farm because of estate tax liability.
and
“The estate tax should be regarded as just paying back to the country for all the wonderful things it’s made possible for the people who have that wealth,� said Bill Gates Sr. in an audio statement played at the press conference. “I don’t think there’s any great societal goal being served by inherited wealth. And certainly there’s no sensible argument that I can think of for insisting on being able to pass the last penny of $100 million on to your three kids.�
So generally or specifically, any thoughts on the stunningly interesting subject of tax policy… And recall the days when the income tax started. The tax code ran 14 pages and and your taxes were done on a single page… Now we waist untold millions each year figuring out the loophole riddled tax code that has been written, more or less, by special interest lobbies.
(original time: 7/7/06, 7:57 AM)
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Categories: Elections & Politics (U.S.)
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June 7th, 2006 at 8:08:12 am
Here’s a very interesting article from last summer from investing guru (and, er, neurologist) William Bernstein:
http://www.efficientfrontier.com/ef/adhoc/estate.htm
Everyone should read it; if you don’t, Bernstein’s point is that the estate tax doesn’t matter much because heirs have a tendency to fritter away their inherited wealth - indeed they have done so in all famous cases except for the Rockefellers.
And if you’re interested in an outstanding primer on wise investing, read Bernstein’s “The Intelligent Asset Allocator”.
June 7th, 2006 at 8:16:58 am
Wow — my respect for Bill Gates just, like, quintupled.
June 7th, 2006 at 8:27:42 am
Just another example of how the wealthiest of the wealthy are trying to shift their tax burden onto the middle class, who will be saddled with the ballooning deficit for generations to come. If you look at the percentage of gross income the middle class pays in taxes versus the wealthiest Americans, it is a disgrace. What is worse is all the misguided sympathy average Americans have for the uber-rich, not realizing these folks are sheltering obscene amounts of their income through tax shelters, offshore accounts, foundations, etc. Congress works for the American people, all right. The richest American people.
June 7th, 2006 at 9:05:08 am
Just another reason the FairTax is better than the retarded tax structure we have now.
June 7th, 2006 at 9:19:10 am
Angrier,
I actually see that argument the other way around - the problem in the US is that the middle class does not pay enough taxes.
Remember Walter Mondale? Poor bastard. Got up on the podium at the 1984 Democratic Convention and said that, because Reagan had done such a terrible job managing the budget, “President” Mondale would have to increase taxes…on everyone.
Noble, yet suicidal, as the general election showed.
Today, there is no serious politician who talks for more than 60 seconds without spouting “Middle class tax cut”. Electoral politics is a game of numbers (except maybe in Ohio), so no respectable politician is ever going to zap the middle class with a tax increase.
Indeed, when President Bush pushes through the outrageous prescription drug benefit in October 2004, with a $400 billion/yr price tag, he does so with NO MECHANISM to pay for it, disengenuously suggesting that the government can cover it (which the government laughably cannot). The best way to raise $400 billion/year? Tax the middle class. No way will that happen.
I conclude this thesis then, by arguing that one of the problems with the American budget/economy, is that the middle class is never asked to pay for outrageous government consumption.
Would the masses support the prescription drug benefit if they were actually charged for it?
June 7th, 2006 at 9:47:01 am
Jazz-
I see your point that Bush is being irresponsible for not paying for the $400 billion Medicare drug benefit (which will actually cost more like $700 billion, since the Administration hid the real cost of the program until after it was passed). However, the rich continue to get most of the tax breaks, shelters, etc. I’m not saying the Middle Class is having their taxes increased, per se. But they are paying higher taxes at the state and local levels as a result of Bush’s policies (No Child Left Behind and other unfunded or underfunded mandates).
June 7th, 2006 at 10:21:28 am
Right DCL, because their money belongs to US ! We are going to have to cough up more money because THEIIIIIR money is not being confiscated. Absolutely Un-forking-American.
Why don’t we stop making government a giant wealth redistribution instrument and then you won’t have to worry (or can ignore) the awful rich squirreling away their money (cause that’s what they do, they don’t spend it on private jets and create jobs for pilots, mechanics, and service industry people, they just give it to aliens or something (or Good Lord, private charity).
Bill Gates is a Communist who speaks thay way only because there is no way the most draconian of tax policies could be a drop in the bucket to his wealth. How many kids does he have anyway? Let’s not forget that he used his company’s power to try to prevent other capitalist entreprenuers from succeeding.
Keep on taking, but do you see the poor getting any better in 60 years of New Deal/Great Society federal government ? Yeah. No.
I doubt the estate tax will ever be relevant to me, but it’s the principle. The idea that people have a qualified, even disputed, right to their property when it reaches a certain level.
Gates says the rich should pay back society for the benefits it has given them. Where’s the evidence that the rich do not ? Everywhere you see something good, it is usually the rich, private wealth, creating it - the new Georgia Aquarium (thanks Bernie Marcus of Home Depot, contributing 250$mil of personal wealth); how many universities, how many endownments. Emory Univeristy ? Built with Coca-Cola money. How many uber-specialist doctors are working in children’s hospitals solving nearly impenetrable problems because the rich gave an endowment to make their salary possible. How many rich are serving for free, retired or otherwise, on charitable corp. boards, directing their efforts with their time.
But the Envy Generation has to keep taking and taking (even if just in principle). They have to hate the rich because they (1) hate individual acheivement; (2) believe everyone is entitled to a materially diverse existence. Both and either lead to Chaos. But go ahead and try.
www.fairtax.org
June 7th, 2006 at 10:25:09 am
May be this is a product of my ‘SC education, but the estate tax, to me, is a way the government screws you twice. You pay taxes on your earning once, then, again after you die. My parents are in no way rich, granted they were able to to send me to USC, with modest help from the USC Financial Aid Office, but should they pass on, I’d have to sell off 1/3 of their assets just to pay the taxes. The estate tax affects middle class families too. It’s not just able the wealthy.
PS. The estate tax is slowly phasing out, per a congressional compromise in the 1980s. The fight now is to end it permanently, ’cause after 2010 (give or take a few years), it’ll be back.
June 7th, 2006 at 10:26:00 am
everywhere you see the Wooddruff or Spalding name, in my own Atlanta, for example, more Coca-Cola money. Why do politician’s not name stuff after themselves ? Well, I bet our own disnoble royal family would be a little embarassed by the Ted Kennedy Memorial 8 Billion Over Budget Underground Highway Project. The rich do it right, better, faster, cheaper, and more generously 50 times for every time your perfect government does it once.
June 7th, 2006 at 10:26:52 am
correction: Spalding is lawyer money.
June 7th, 2006 at 10:52:02 am
dcl -
Your complaint is one on overspending by the government which, in and of itself, is a critical and valid one. One that has long been ignored.
But the estate tax is bullshit. All your whining about money that is owed to the government was ALREADY PAID to the government. Income taxes were already paid. You think that estate of the person should be taxed AGAIN just because they died and were rich? Hint: That money is NOT the government’s. Its the individual’s from whom the government takes it from. The person is not taking a damn dime from the government.
And yes, PLEASE, start breaking out the total percentage of taxes paid by the top 1% of the US and the lower 99%. Boy, REAL discrepancy there alright.
Is it a trillion dollars less money rolling in? Perhaps. Guess that means the government should, Oh, I dunno… CUT SPENDING!?!?
June 7th, 2006 at 11:24:00 am
Oh, I dunno… CUT SPENDING!?!?
Great. We can start by halving the defense budget, which is the single largest segment in gov’t appropriations.
See, it all depends on what you value the government spending its money on. If you think the government has a valid interest in ensuring that its population continues to have access to the best post-secondary education in the world, then you might support subsidized Stafford loans, the NSF, and the NEA. If not, you call for the abolishment of the Dept. of Education, a la Reagan. And what about our handouts to farmers? And the 3 or 4 billion we give to Israel every year? And bridges/railroads to nowhere?
“Cut Spending” as some sort of vague mantra is silly without telling us where you’d like spending to be cut. Unfortunately, the first target for many (but not all) who spout this line includes students, children, and the poor.
June 7th, 2006 at 11:35:29 am
Admittedly haven’t read the previous comments in their entirety, but do have the flavor and feel a need to jump in.
I think the problem isn’t that taxes are too low, but rather that benefits are too high.
Particularly the coddling of the baby boomers. If they failed to save enough to survive their retirement, then they are going to have to settle for the minimal standard of basic health care provided by Medicare / Medicaid. Creating $700 billion drug subsidies is ridiculous. The real battle in this country should not be democrats vs. republicans, heathens vs. unborn babies, god squad vs. gay marriage, red states vs. blue states, etc. It should be the future vs. the past. The young should wield whatever political might they can muster, and crush the resource using irresponsible older generation, who while enjoying the strongest economic period the American blue-collar workforce will ever enjoy, overspent so much that they can’t pay the doctor.
The youth need to mobilize and say that we may disagree on abortion, gay rights and other bulls**t issues that divide us currently, but we are united in our outrage over the boomers use of the political machine to squander the future of this great nation.
June 7th, 2006 at 11:49:21 am
Not wading into the meat of the debate (my lunch break isn’t that long!) but just wanted to voice a brief objection to this:
a population that has never done anything to earn that money
While it’s certainly true that there are people in this country who have “never done anything” to earn their money — i.e., they inherited it — it is certainly false (and, dare I say it, prejudiced) to attribute this characteristic to the “population” of the wealthy at large… even the uber-wealthy. Do you think Bill Gates has “never done anything” to earn his money? Steve Forbes? Barry Bonds? Okay, the last one is a bad example. :) But you see my point, I hope. Not every rich person is a Paris Hilton. Not even every uber-rich person is a Paris Hilton. And claiming otherwise makes you look ignorant, severely detracts from the rest of your argument, and causes a segment of the population to justifiably tune you out.
June 7th, 2006 at 11:51:42 am
P.S. Class-based prejudice is wrong, whether it’s aimed against the wealthy or against the poor.
If you want to say that wealthy people should pay higher taxes (or at least that they shouldn’t pay lower taxes), that’s fine. But claiming that none of them have ever done anything to earn their money is beyond the pale, and basically no better than saying “people on welfare are a bunch of lazy bums.”
June 7th, 2006 at 11:58:07 am
4-7
You’re an idiot. The government isn’t a giant wealth re-distribution instrument. It is a fiscal train wreck that is mortgaging the future of your children and grandchildren to the Chinese Government. All I am asking is that the wealthy pay their fair share instead of hiding behind some fantasy that they actually contribute a larger percentage of their gross income in taxes than the middle class - which they don’t.
June 7th, 2006 at 12:09:09 pm
“All I am asking is that the wealthy pay their fair share . . . .”
What is a “rich” person’s “fair share?” What that person can AFFORD? Can someone come up with a more myopic, feel-good, and downright craptastic approach to tax policy?
June 7th, 2006 at 12:10:00 pm
. All I am asking is that the wealthy pay their fair share instead
They’ve already paid their fair share — income taxes. Everytime they buy that expensive Mercedes, Yacht (sp?), condo, they pay a luxury tax.
Angrier, lest you forget how the US government instituted income tax, the estate tax will affect you, too.
PS. A history for those who forgot, US income taxes started out as a tax for the wealthy (”easing the tax burden for the middle and lower class”). That’s how congress was able to convince Americans into passing the tax. If you read on about it, it’s interesting how some of the language arguing for the estate tax are exactly like those arguing for the income tax.
June 7th, 2006 at 12:21:04 pm
Angrier -
They DO pay over 75% of the tax burden of the US population though. Is that NOT they’re fair share? Are you really arguing that what we need is a system where the amount of taxes you pay is a set percentage of your annual income? And do you realize what impact THAT would have on the tax code? If you said everyone has to pay 10% of their income, you would get more income from the rich, and also cause more bankruptcy among the poor who pay near-zero to zero taxes who would then suddenly need to cough up money for their 1040’s. Again, why should the rich be taxed twice when they are already paying the VAST majority of the tax burden? Because they could afford to be taxed more is not a resonable argument. Nor is that they should be taxed twice.
Briandot -
A very good question. And couldn’t defense USE some cutting? The kind of spending waste that happens in the armed forces and, more to the point, the Pentagon, is legendary.
As for me, ’spouting that line’:
http://www.porkbusters.org/
That doesn’t hit the poor, students, or children, and is an excellent place to start.
And no, I don’t exempt military spending at all. Though I would take a more serious look at state spending of DHS grant money. At least with military spending it is getting spent ON THE MILITARY, wasteful or otherwise. With those DHS funds, your actually lucky if it goes to security.
June 7th, 2006 at 12:29:47 pm
to echo bloy’s point. Even if you’re Paris Hilton, while we can certainly take swipes at your decadence as a matter of social decorum, one of the biggest incentives of the risk-taking and sacrifice that makes wealth (the risk and sacrifice that the Hiltons at some point had to take on in, say, starting the first hotel) is that you can take care of your family and future generations.
A&A. I may be an idiot, but I’m not stupid enough to think an idea of government responsible for the future of our children is anything more than a house of cards (hence the train wreck, the endless and stunting racial and class political baiting, etc.). Our freedom makes us responsible for ourselves. Government can come in at the transactional logjam between individuals trying to come together for efficient ends, and to rescue abandoned children (with the obligation as, in loco parentis, to raise them to be as self-reliant as the happy capitalist’s child). You will never “tweak” this vast federal “provider” beauracracy and hear a harmonious sound. It is a train wreck and will always be a train wreck because it is at odds with the great (but as yet unperfected) notions of freedom that formed our Constitutional Republic.
The “Birthright” mentality fostered by our current political rhetoric - what can government do for ME ? - is the greatest perpetuator of poverty and self-loathing in our society. And it always will be.
I’ll take whatever fellow “idiots” I can find and head for the woods (or the beach).
June 7th, 2006 at 12:37:44 pm
Wow � my respect for Bill Gates just, like, quintupled.
For accuracies sake (and I knew someone would probably make this understandable error) I should point out that William Henry Gates Sr. (actually William Henry Gates II) is the father of the well known founder and chairman of Microsoft, William Henry Gates III. Technically not a true Sr. since he is the III but the term is used to differentiate him from Bill.
Of course Bill Gates III has said he will donate most of his wealth to charity upon his death as well.
Back to his father, the one who made the comment, he is a founding partner of the law firm Preston, Gates and Ellis, is on the Board of Regents at the University of Washington, is on the Board of Directors of Costco, and is co-chair of the Bill and Melinda Gates Foundation, a charitable organization started by his son and daughter-in-law.
June 7th, 2006 at 12:40:07 pm
I’m sure the wealthy families of this country who pressure the Congress and President so they don’t have to pay their fair share appreciate the insights of Useful Idiots like 4-7, Joe Mama, et al. I don’t believe the government should work solely for the benefit of the wealthy at the expense of the middle class, as it does now. I guess you folks are hoping to be the head banana collectors when the Banana Republicans complete their mission of turning this country into a backwater Banana Republic.
June 7th, 2006 at 12:40:52 pm
4-7 First off, it is our civic duty to, you know, pay for the things that government does that we could not do for our selves. And much of the money, achieved through various stock related benefits is taxed differently than income. And the rich have been lowering and are attempting to eliminate that tax as well such that they pay basically no taxes on that money, ever.
Brendan, don’t be daft. Bill Gates is not effected by the estate tax, he will be dead, it’s his kids that are effected. likewise it is Paris Hilton that takes the hit for the Estate tax not grandpa Hilton founder of the Hilton hotel empire. In other words, the loafers are disproportionately impacted by this tax. The people that are actually doing something and building wealth will likely end up making more than they inherit anyway, except for the insanely uber rich families. At either point you need to honestly ask the question, what difference does it make if you have 20 billion dollars or 10…
Lastly, 4-7… so your parents have a net worth over 4 million dollars. Hmm, even by the cost of living in LA, that’s really not so bad… Oh yeah, and that first four million is totally exempt.
June 7th, 2006 at 1:02:14 pm
And I’m sure all the wannabe-socialists in this country foaming at the mouth for their take of others’ income to be used for their own annointed view of “social good” are likewise appreciative of the insights of Useful Idiots like yourself, A&A. Let’s not forget who coined the term “Useful Idiot” (Lenin), and who he was describing (Western dupes ignorant of the facts who endorsed his worldview).
June 7th, 2006 at 1:10:26 pm
Anyway, if you want to talk solutions to problems… well lets consider some.
The military. Lets make the entire military budget come from a sales tax. (with some provisos to help the poor obtain basic necessities if living). If you want to increase defense spending you’ve got to up the sales tax. If you want to go to war, you must sell war specific bonds that will be paid back from the sales tax. I think that should insure people are behind a war, and force politicians to justify defense spending to the people.
Eliminate those stupid and totally random FCC and other telecommunications fees that have been rotting on the books for over a century that make no sense.
Restructure Medicare, Medicaid, and Social Security into one sensible program. Money from this area cannot be borrowed from or other wise raided. Instead of the payroll tax you create a fee for the program. The fee would be based on income level but primarily on an actuarial risk assessment and the number of dependents. (64,000 dollar cap (and that is a percentage of 64 K not 64 K) goes away.) What you get: Health care, with dental, medication, and vision benefit (based variously on the military or federal government worker or member of congress plans…). For you and your dependents. (Obviously if you want more you will be able to pay more and get the services or plan features you want). Basic coverage will be from birth to death on health. We would continue the function of Social Security as the keep you from starving to death or eating cat food in a refrigerator box program that it was. However, retirement age will be raised and tied to fancy pants function of average life expectancy. We don’t need people starving in the streets. There should also be a disability benefit of some type as there is now. But the stipends should act more as a safety net than an excuse not to plan for your own retirement. And of course, if you are wise in your investing you should be able to retire before the retirement age.
All federal highway construction and road building will come from a gas tax. Any money given to states for roads will likewise come from the gass tax.
Everything else in the federal budget. I think there are several important government functions in the rest of the budget that need to be paid for. Something along the lines of a value added tax combined with certain estate taxes on inheritances in exempting the first 100 million dollars and not at the rates common in Europe… Or perhaps maintain the income tax at lower levels and massively simplified.
The upshot of this is not necessarily in the specifics, but in the separations. I think making distinct separations between different taxes and what they go to pay for will help people better understand what the government is doing, and better control how they want the money spent and what they are willing to pay for.
June 7th, 2006 at 1:12:25 pm
Joe Mama, might I suggest Gorgias by Plato. The Oxford translation of it is quite good.
June 7th, 2006 at 1:17:48 pm
Suggest it for what?
June 7th, 2006 at 1:21:26 pm
I would argue that no tax is more consistent with American ideals than the extate tax. The notion of “America” has always included, in part, a rejection of aristocracy. One might question the extent to which that rejection has ever been realized, but there’s no denying that it’s a significant part of American political thought. Here, you succeed or fail in life based on your own intelligence, inginuity, and effort; not based on who your parents were.
So, given that ideal, and given that even the most anti-tax among us must concede that the government must collect some revenue, what’s the best way to do so? Tax work? Tax investment? Tax property? Well, we do all those things, but surely we should tax unearned inheritance as well. For people who feel the wealthy shoulder an unfair portion of tax burden, I’d suggest focusing on income, property, and capital gains taxes. Leave the estate tax alone.
Anyway, it’s not as though we actually prevent people from aquiring fabulous wealth by virtue of a lucky birth. We just require that they make a contribution to the federal coffers that would otherwise have to come from someone earning their wealth.
June 7th, 2006 at 1:27:21 pm
Your your facile understanding of the effects and qualities of rhetoric and the decisions of politicians.
June 7th, 2006 at 1:37:00 pm
dcl -
Now THAT’s a post.
I disagree with the sales tax for military spending. It would be VERY dangerous to make the support for military dependent on the fickle spending of the average consumer. That can theoretically make whether a soldier lives or dies dependent on whether you decide to save money or actually go out and buy twinkies. I think a budgeted amount for them from income taxes is a better plan than the sales tax.
Now, the gas tax is reasonable because it is directly adherent. Those who use gas use the roads. Direct correlation. One problem with that plan though. We ALREADY had a gas tax for every gallon we pump. Seriously, did you know that? Part of the reason prices are so high is the federal tax on gas.
Not sure about your medicare, Medicaid, etc. proposal, but the point on locking it up away from Congressional raiding is mucho bueno. Something that should be seriously considered, but won’t be by present represenatives from either party.
I still have a problem with the estate tax though. Its an underlying problem of doubletaxing the same income. I’m not rich and no fan of them, but that concept is abhorrent to me. You should not be subjected to taxation on income that has already been taxed.
Now if you want to make an argument on a more fair tax code basis, go right ahead. But do keep in mind that the top 50% of wage earners pay 96.03%! of all income taxes. 96%!
And its not just simply as taxing the rich more as the rich end up dumping FAR more money into the economy than middle or lower class does. This is both in consumer spending, donations to non-profits, and, most importantly, capital investments. When you tax the rich more, the less you get of ALL these other activities.
So, though your being far more reasonable about than Angrier, my question is the same: What do you think should be the FAIR share that the rich pay in taxes? On a proportional basis to their total income, no, its typically less than a middle class family. BUT, their income is far more devoted to economic development than the same middle class family.
June 7th, 2006 at 1:42:42 pm
Aaron -
Estates that are taxed going as an inheritance to whomever (its not just family members) are not all cash. They include BUSINESSES. And the total asset value of the business is used in determining the estate tax.
Doesn’t seem very American to cause a few people to lose their jobs so that the government can double tax assets upon someone’s death.
From Dictionary.com:
Aristocracy: A hereditary ruling class; nobility.
Ruling class?? Not unless they get voted in. And they are not nobility because “Congress may not grant titles of Nobility”.
Sounds like even with no estate tax, the fundamentals of American rule will live sound and strong.
June 7th, 2006 at 1:43:38 pm
Dane, the idea od tying spending to taxes in clearly understood paths is great and bound to resonate with many voters.. but not with those who benefit from the current mess, which includes people of all stripes. It would be a monumental battle and I can assure you the poor would probably end up taking the hit. Take California’s budget (not as big as the national budget, but since it’s in the 100 billion range, it is bigger than many states combined): In California, Prop 42 was passed to ensure that fuel taxes go to roads. Will, it has been totally or partially raided since Prop 42 passed, and this yera, when the Guv and the Legislature where working on a massive bond package which included everything from levees to education to transportation to housing to you name it, it was ultimately the teacher’s union who killed the transportation part, because, uhm, they did not want to close the loophole that allows for raiding the fuel taxes fund. The teacher’s union was soo oposed to loosing that stream of money for education (nevermind that they already have Prop 98 which guarantees them quite an amount of money, and over half the budget goes to education, at about 50 billion) that they made sure the bond went down. The whole bond pacjage got resurected and passed (up for vote in November) but not without having to fight off the teacher’s union again. I guess my point is, while dedicated revenue sources that make sense sounds great (and believe me when I say the sound great, I amnot being sarcastic), they are opposed by many powerful interest and I am not sure that in the end we would solve much, unless we are commited to dedicated spending and with living with the consequences (teachers and others have also bitched that local governments cannot have their money basically confiscated by the state, Prop 1A). The popularity of Prop 1A and Prop 42 should be an indication of popular support, but the opposition to these types of ideas by the powerful interest who stand to loose from them cannot be ignored.
June 7th, 2006 at 1:46:14 pm
MY “facile understanding of the effects and qualities of rhetoric and the decisions of politicians”? This from the guy who thinks that simply separating out which taxes pay for what is a solution the government’s budget problems? Might I suggest reading up on the evolution of the Social Security trust fund for a less FACILE understanding of politicians’ ability to compartmentalize tax proceeds.
June 7th, 2006 at 1:53:02 pm
I wouldn’t care if the estate tax affected no one else but Bill Gates. The principle of the gov’t taxing income that has already been taxed simply because Bill had the nerve to assume room temperature and the gov’t was concerned about his kids becoming “loafers” (would that the gov’t cared so much about loafing) is repugnant to me.
June 7th, 2006 at 1:53:46 pm
I’ll be more than willing to talk about repealing the estate tax once the rich stop using lobbyists to get all sorts of tax code loop holes that help them pay far less than their fair share.
June 7th, 2006 at 1:56:15 pm
Like Lojo said (and I assume you know) fuel taxes already greatly fund our transportation spending at the federal level. What California pays in fuel taxes goes back to the federal government, and that amount is what the transportation funding for the tate is based on. The federal tax on fuel goes to funding transportation. Some of the problems arise in where that money go, both what states and to what projects, and therein lies the problem, and not so much on where the money is coming from.
Back to my earlier post about tying revenue to funding, public school funding would be one of those areas where this concept would present problems. Public school is funded locally, so wealthier areas have better public schools. This is basic revenue to funding, but it has undesirable outcomes, which is why, atleast in the state of California, not all public school funding comes from property taxes and the like. Those constituencie that would be hurt by basic proptery taxes to education would not like the idea, and really society stands to loose from going back to the way we used to do it, but then, you end up with what we have to day: donor local governments who get shortchaged (think Orange County, welathy yet home to many immigrants who are english learners who need a little more help). Couple that with declining enrollement and you end up with a super donor local govenrment. And you end up with the nightmare that is LA’s LAUSD.
All this is not to disagree with your idea of trying revenue to spending. I am a big fan whenever possible, politically and otherwise.
June 7th, 2006 at 1:56:56 pm
David -
Again, same question. Please define ‘fair share’. I’m not being pissy, but that term keeps getting thrown out and I have no frame of reference of what you guys mean from it.
June 7th, 2006 at 2:03:45 pm
BTW, does anyone else think we were argument starved in the comments considering this thread is unfolding this fast on Estate Taxes?
June 7th, 2006 at 2:14:11 pm
David, A&A, dcl, etc.,
I suggest reviewing the tax return data compiled by the IRS for the years 1985 through 2003, which is available here:
http://www.irs.gov/pub/irs-soi/03in05tr.xls
You’ll find that regarding total income reported to the IRS by all tax filers, the percentage of that income earned by the top 1% of filers (i.e., the richest 1% in the nation) in 2003 was 16.77%. You’ll also find that the percentage of the total tax burden for 2003 (i.e., the total income taxes collected in 2003) paid by the top 1% of income earners was 34.27%. And do you know what level of income it takes to be classified as the top 1% of income earners? $295,495 or more.
5%? $130,080 or more.
10%? $94,891 or more.
25%? $57,343 or more.
50%? $29,019 or more.
Finally, you’ll see that the percentage of the total tax burden paid by the top 50% of income earners in 2003 was 96.54%. In other words, 50% of tax payers paid less than 4% of the total tax bill in 2003. You may want to bear this data in mind when opining about the “rich” paying their “fair share.”
June 7th, 2006 at 2:20:18 pm
Lojo,
The “twice taxed” argument is just misdirection, as it applies to practicly any combination of taxation. If I work to earn an income, have that income taxed, use what’s left to buy stuff, and have those purchaces taxed, have I not been taxed twice? Maybe you think we shouldn’t have that sort of double taxation either. Fair enough, but then your argument is not with the estate tax per se, but with our entire tax system.
The “estate tax is a tax on businesses” argument is indeed the best one against the estate tax. (Note that I distinguish this from the lost businesses argument. Sensible diversification should enable estate holders to pass on businesses to their heirs.) To the extent that the estate tax acts as a de facto tax on job providing business, I’ll concede your point. But still, the same argument applies to direct business and corporate taxation, right? So if an overall lowering of business taxation is desirable, I’d rather see it come from those sources.
Aristocracy: A hereditary ruling class; nobility.
Touche. I won’t give up that easily though ;) I’d say that limiting the definition of “hereditary ruling class” to those of us elected to public office, ignoring the great power to be wielded through (inherited) wealth alone, is to define things a bit narrowly.
June 7th, 2006 at 2:24:56 pm
From …limiting the definition of “hereditary ruling classâ€? to those… strike “hereditary”.
June 7th, 2006 at 2:28:20 pm
I sort of echo Lojo’s question about “fair share”. Do the rich in the US not pay their fair share?
Lojo has argued more than once that the rich, however measured, either above average or top few percent, pay far more than their statistical share of taxes. This is inevitable.
Why, you ask? Because it is necessary for our capitalist economy to function. Think about the corporations that are the engines of the economy. Take Exxon Mobil, as an example.
Bill Gates can only travel in one car at a time. He therefore can only consume a fixed amount of Exxon Mobil gasoline. Joe Blow, near the poverty line, can also consume about the same fixed amount of gasoline.
If Bill Gates is forced to pay another dollar of taxes, there is no chance his gas consumption will go down. Joe Blow may well be forced to stop driving by incremental taxes.
Therefore, to suggest that the rich don’t carry the disproportionate burden of US taxes is to ignore the economic drivers of our economy. There will never, ever, ever be a flat tax, since too many poor people would see their marginal rate shoot up, and be forced to stop consuming.
In conclusion, to the Angriers and Davids of the world, who see the US as a place tilted to the advantage of the wealthy:
in certain respects you’re right, but there should be little doubt that the people who are going to pay for the fiscal irresponsibility of the current administration are rich people, whether through estate taxes or otherwise. The alternative is too risky to the economy.
I kinda liked Russ’ idea - focus on the spending, not the taxing.
June 7th, 2006 at 3:33:17 pm
Jazz, the problem is that the rich, through there lobbiests and tax lawyers have managed to get out of paying a fair amount on their taxes, and for purposes of this discussion i’d label fair as equal percentage above a certain minimum amount of wealth earned (i.e. if you earn less than X amount per year you don’t pay taxes, if you earn X + Y your tax can never be more than Y such that you will always make atleast X, this is inorder to protect someone who makes X + $1 from having to pay taxes and actually gross less than X, where as if he has earned X - $1 he would have no tax burden).
Personally I think that we should have a graduated tax as I think the wealthy benefit more from the resources of this country than the lower classes, but thats just me. I realize that is a different arugment, so in this case I would like to see someone who makes say $5,000,000 have to pay about the same percent as someone who makes $50,000.
June 7th, 2006 at 3:41:22 pm
Joe Mama,
I’m not sure how you are getting those numbers from that data, I see nothing that equates to what you are talking about unless you linked to the wrong document.
What I want to know is.
How much money did the top 1% make and what percentage of total income was that.
Then, how much money did the top 1% pay in taxes and what percentage fo the total taxes was that.
As to this point: Finally, you’ll see that the percentage of the total tax burden paid by the top 50% of income earners in 2003 was 96.54%. In other words, 50% of tax payers paid less than 4% of the total tax bill in 2003. You may want to bear this data in mind when opining about the “rich� paying their “fair share.�
Well for one thing you are completely ignoring the fact that EVERYONE gets a minimum fixed amount deduction on what they owe. The reason being that those people barely make enough as it is. What we should do is cut out of the numbers you are using anyone who falls below the threshold for even paying taxes, as they are allready being taken advantage of by many cases the rest of society anyway for their cheap labor.
Of course we have to be careful with the numbers you are giving us, because if it includes taxable income and not total income then we are getting flawed data, as the problem I am pointing out is that the taxable income of the wealthy is artificially low because of lobbying and loopholes in the tax code.
June 7th, 2006 at 3:48:17 pm
David, your last comment makes me wornder if you are a little confused as to how income taxes work (I do not mean this in a condecending manner). If you make X, and that puts you in tax braket B, you pay the tax rate for tax braket A until you hit tax braket B, and pay tax rate Bon the difference bewteen X and ta braket A’s limit. So, you are not penalized for making a dollar over tax braket A’s limit by paying rate B, you pay rate A up to when you hit rate B, and pay rate B on the remainder. That is confusing, but doe sit make sense? Also, we do have minimun tax amounts, intended to make sure rich people always atlest a cretain amount. It is the alternative minimun tax, and it is actually part of the tax problem, as more and more middle class families, especially in places like California (where you have to make 200k combined to be middle class and afford a no frills home) start getting closer to the alternative minimun tax. See, the amount was once really what rich people made, but over the years, it’s closer to what middle class families make. I might have gotten some details confused, but that is the gist of it. Your last sentence is confusing, you wnt the guy making 5ok to pay the same rate as they guy making 5 mil? Uhm, well, that is fairly regresive, and screws the guy making 50k, because any percent of 50k is going to hit him harder than that same percent will hit the guy with 5k. Which is why the more you make, the higher the tax braket. What did you mean by graduated? Taxes are “graduated, meaning the higher incomes pay higher percentages.. You are contradicting yourself and confusing me, saying you want graduated but the same percentage. Or, are you seriosuly under the impression that rich people pay a smaller percentage in taxes? Because they pay a larger percentage and a larger amount, and a larger percentage and amount than the rest of the taxpayers.
June 7th, 2006 at 3:59:24 pm
What we should do is cut out of the numbers you are using anyone who falls below the threshold for even paying taxes, as they are allready being taken advantage of by many cases the rest of society anyway for their cheap labor.
Dave, uhm, want to back that up? People who end up not paying taxes are not being taken advantage of by society, they are taking advantage of all the benefits afforded to them (from actual govenrment aid to use of infrastructure and resources that the taxpayers paid for) and not paying taxes for it. Just because they do not make enough to supprt themselves and pay taxes does not mean we are taking advantage of them. Are they being paid low wages? yes. Do they deserve better wages/ Well, that is a tricker question. I mean, really, how much does a cashier making a little above minimun wage deserve to get paid? What her labor is worth. If that puts her in the category of people who do not have to pay taxes, society is not taking advantage of her, life circumstances and life choices put her there, and we cannot broad brush say that society is taking advantage of her. Granted, you said many cases, not all cases, but come on Dave! That is grossly inaccurate.
As for the taxable income comment. Those “loopholes” are there for everyone, so unless you get specific as to what loppholes you are deriding, I cannot take your comment seriously. Is a tax defered account a loophole for the rich? or something we can all take advantage of and benefit from–and pay taxes on one day, rich or middle class or poor. Is a medical account that is pre tax a loophole? We should all be saving pre tax dollars for medical expenses, and currently those types of accounts have clear penal;ties anf fines for non medical use (like 401ks and IRAs have penalties for non retirment use). So, please, give me some loopholes and I will consider this charge more sriously. I am not claiming they do not exist, I jsut want some examples, because often times what people deride as tax shelters are things that help the average guy out. I am fully open to the idea that shitty tax shelter exist, no doubt, which is why the (politically unrealistic) idea of a VAT tax sounds great to me, and I am all ears on how to simplify the code and strealine the process.
June 7th, 2006 at 4:00:57 pm
David, your last comment makes me wornder if you are a little confused as to how income taxes work.. Clearly you posted again before me, so I hope you figure out what post I was addressing.
June 7th, 2006 at 4:38:04 pm
Joe Mama-
What you don’t mention is that the top 10% control 90% of the wealth. If the top 50% is shouldering 96% of the taxes, it means the top 10% isn’t paying as much as it should be.
Oh, I love watching people like you argue for the end of a tax that will never impact you in order to benefit a class of people who will never have anything to do with you. Sucker.
June 7th, 2006 at 4:59:04 pm
Bea, i understand how taxes work now, i’m just pointing out what a specific scenario that I think most would agree was fair, i.e. that you have a minimum level at which you can’t be taxed, above that you have a small set who are taxed at a growing percent, such that their tax doesn’t drop them below the minimum level until you reach a fixed percent which is paid by all.
I suppose a simpler way to put it, is take what you earn, subtract the minimum tax level, and tax what is left at a fixed percent for everyone.
For example lets say the minimum tax level for an individual is $40,000. And the tax rate is 15%.
Someone who makes $40,000 or less pays no taxes as subtracting this amount from their actual wealth results in a number that is less than or equal to zero.
Someone who makes say, $60,000 would pay taxes on only $20,000, at the rate i mentiond above, $3000.
Someone who makes say, $600,000 would pay taxes on $580,000, which is $87,000.
Again in theory this is similar i suppose to how the system we have now is suppsoed to work.
June 7th, 2006 at 5:18:31 pm
Well, that is a tricker question. I mean, really, how much does a cashier making a little above minimun wage deserve to get paid? What her labor is worth. If that puts her in the category of people who do not have to pay taxes, society is not taking advantage of her, life circumstances and life choices put her there, and we cannot broad brush say that society is taking advantage of her. Granted, you said many cases, not all cases, but come on Dave! That is grossly inaccurate.
I understand what you are syaing, but I still think they are being taken advantage of by society, as they are put in a position where it will be very difficult for them to ever achieve anything but that minimum wage job. Yes America is a land of greater opportunity than other places, but the bottom line is that there still isn’t enough opportunity to go around, and their probably never will be.
What do I mean? Well there are those that argue that we should just let the market sort things out, and that people will get paid what the market determines. The problem I have with this is that a few things skew what the market will do. First not everyone starts from equal footing, therefore there is an allready introduced market bias. If you are the son of Bill Gates, you are going to have a better shot than being the son of some random minimum wage earner. Thats not to say that the son of Bill Gates will necessarilly suceed, or that the sone of the minimum wage earner cna’t become the next millionaire, I think America provides a better opportunity than most for that to happen. BUT the laissez faire arguments some people make completely ignore this inequality.
In addition, the market is never even anyway, the rich are able to exert an extraordinary force that the poor can’t. Unions and trust busting and government regulations have helped, but still the fact that you can have corporations like WalMart exists where a select few get rich off the labor of the poor seems to me an example of the inequality of the current system. THe argument often goes that the CEO is of course more talented and more capable of being in that job over the cashier so they should earn more. To an extent I can agree with this characterization, but I don’t think its entirely accurate. It would be true if say everyone were given the opportunity to try and be a CEO or everyone who was a CEO started from the same spot as those who weren’t but thats not what happens. Now I don’t think that we need to create a system where everyone gets paid the same or some other communist system. But I do believe that there is a moral obligation of those who are better off to help those who aren’t (with exceptions for those who refuse to help themselves, etc). But this is more than just some wishy washy love the world belief because in addition to the moral incentive I think it can be argued that it is better for society as a whole if additional services are provided for free to lower income groups, not as a hand out, but as a hand up so to speak. I think universal health care especially for children is important as it creates a healtheir society for all. In addition i think better free public education, even if it means we tax the wealthiest groups at a slightly higher rate is worth it because it benefits the society as a whole (better education leads to less violent crime, provides a stronger work force, etc).
But yes I truly believe that the well to do in our society are taking advantage of the poor, whether it be migrant workers, or WalMart employees, the bottom line is we are a society that in many ways is driven by greed.
June 7th, 2006 at 5:25:11 pm
Those “loopholes� are there for everyone, so unless you get specific as to what loppholes you are deriding, I cannot take your comment seriously. Is a tax defered account a loophole for the rich? or something we can all take advantage of and benefit from–and pay taxes on one day, rich or middle class or poor. Is a medical account that is pre tax a loophole? We should all be saving pre tax dollars for medical expenses, and currently those types of accounts have clear penal;ties anf fines for non medical use (like 401ks and IRAs have penalties for non retirment use).
They may technically be there for everyone but in reality that is not always true. For one thing our tax code is so complex that even tax lawyers can’t fully understand it. Beyond that the average person doesn’t have the time or resources to even learn of all the exemptions that exist, the wealthy are able to afford tax lawyers who can help them find every single deduction, the lower income groups can’t. Beyond that some types of deductions are geared towards the wealthy more than the non-wealthy. Who is able to invest a larger part of their income in tax sheltered investment accounts? The wealthy, they don’t need to use that money, someone who barely makes a living wage can’t afford to do that. I’m not saying what they have done is technically illegal, but its one of the problems i have with the lobbying establishment in Washignton. Its easier for people with money to push their interests than those without, I just wish I knew of a way to fix that.
June 7th, 2006 at 5:30:06 pm
David, I have no time today to respond. But one small comment. You changed from society taking advantage of the poor, to the rich taking advantage of the poor. Either way I disagree, because no redistributive policy is going to get rid of inequalities completly, so saying that the rich exploit the poor to keep labor cheap is, well, not completly accuarte. A grocery store paying a high school kid, or a single mom with no or little education, minimun wage to bag groceries, is not the rich or society taking advantage of her, it just means that, for the kid, he has to finish school, and for the mom, she wither made ppoor choices or got dealt a crappy hand in life, but either way, she is not being exploited. Sure, not everyone has the same opportunities, but this person is not paying taxes, using the roads we pay for, using the welfare rpograms we pay for, etc, so she is not being exploited, she is benefiting from the safety net. Now, I think the welfare state is dehumanizing, eroding autonomy and self-suficiency, encouraging waste and mediocreness, and it is bad because it needs a constituency, a poor class, to perpetuate itself. But, that is another topic for another day. My point is, this rich evil people exploting the poor who don’t pay taxes is not really that simple.
As for your tax scheme, sounds like you are making income taxes into a VAt-like tax. In that case, you go with a sales tax, exmept the poor and life’s necesities, and simplify it all. Otherwise, you’re just proposing a different version of what we currently have–with the regresive tax component that, I think you do not realze, can be a very bad thing, because like I said, rich people pay greter percentages because it is less of a dent on them than on the smaller guy. I just don’t get why you advocate for the same rate to all, when you are so agaisnt the rich getting any break. Maybe someone has the time to explain why your stated goal is not achieved by your suggestion. I gotta go have a beer :)
June 7th, 2006 at 5:34:32 pm
David, give me some actual loopholes, please. The ones I mentioned are there for anyone, and actually, even low income Americans. I am sure you can come up with a bad loophole.
June 7th, 2006 at 7:11:57 pm
wow. this thread sure took off quick. My posts and responders are too far above now to make any meaningful retort.
This seems amazingly one of those issues you just can’t convince people on who are on the other side. The juvenile contempt for the rich is just mindboggling, but I guess you have to give up eventually. It will always be there.
It is a mark of a good man who sees another man succeed and does his best to emulate him. It is the mark of a coward, a brute, and a violent thief to hold the man in contempt for his success, to envy him, to constantly belittle his position as unearned, unentitled, over-established, and belittle his humanity as decrying his contributions to society as “below his fair share”.
I don’t like lobbying much myself, but anyone will always try to find ways to legally avoid government collection of their wealth. Not because they are greedy (because their greed will feed and clothe far more thousands than pathetic handouts) but because we all have a moral entitlement to the fruits of our labor, skill, good fortune, prudence and sacrifice, whether the fruits remain in the family, whether they are humble or gargantuan.
Tax is as certain as death, but when the government or citizens exploit disparities in wealth and seek to equalize social conditions by taking where not absolutely necessary for fair, evenhanded, blind treatment of citizens, they have done far more than collect for the general welfare.
Damn you socialists are pretentious. It’s as if it’s your money.
June 7th, 2006 at 7:16:06 pm
equally mindboggling was the Johhny Carsonesque musing about my family’s net assets, in an earlier post (dcl or A&A). How I gave any information out about that in posting is beyond me, but the attempted invasion of privacy shows you how little the socialist mentality cares for real, hallowed, sacred personal rights when it gets in the way of today’s Red Army coming to pick up community farm equipment from modern Ukrainian holdouts.
June 7th, 2006 at 7:56:22 pm
4-7, you said your family would be impacted by the estate tax and that you got financial aid from USC… In that you opened the door to the musing that since the estate tax exempts the first four million dollars you may not be as hard up as you made it sound. This is either true, or you are in no risk of being destroyed by the estate tax. I have no problem with the success of others. I don’t even have a problem with others getting a nice inheritance that will make them financially secure through their entire life. It is a situation I would like to be in, so certainly could not begrudge someone else for being in it.
As a matter of course, one of the people I work with is in such a situation where, if she wanted to, she probably wouldn’t really need to work a day in her life, or if she did, could have a very nice job in the family business. That she wishes to and in a totally different area from where her family made its money is most admirable. If I were in such a situation I would probably go try and become a professional travel photographer.
June 7th, 2006 at 8:34:51 pm
David,
I’m sorry you can’t understand the IRS document I linked to. But that is what’s known in technical jargon as a YP, not an MP. In any case, the comments in this thread remind me of an old anecdote that Gorbachev told James Baker about the difficulty Russia was having in its psychological transition to capitalism, after so many years of communism:
A Russian peasant finds a lamp by the side of the road, and rubs it. Out pops a genie. The genie tells the peasant he will grant him any wish. The peasant tells the genie, “You know, I have only three cows, but my neighbor Igor has ten cows.”
“Would you like twenty cows?”, the genie asked.
“No,” says the peasant.” I want you to kill seven of Igor’s cows.”
To be fair, this mentality isn’t limited to socialist countries. There is a well known quote in my old industry right here in the good ol’ capitalist US: “It is not enough that we succeed. Our competitors also have to fail.”
June 7th, 2006 at 8:44:34 pm
Following dcl’s last post, 4-7, I think your characterization of your opponents on this thread as “holding the wealthy in contempt” is a bit harsh.
For example, David proposed a progressive tax scheme that can hardly be characterized as vindictive against those who create wealth.
I don’t agree with it, but I didn’t get from his comments that the wealthy were to be (unduly) penalized if he had his way…
June 7th, 2006 at 8:48:11 pm
“What you don’t mention is that the top 10% control 90% of the wealth. If the top 50% is shouldering 96% of the taxes, it means the top 10% isn’t paying as much as it should be.”
I’ve provided hard data to back up my claim, Mad Max. Where’s yours? What does “control[ling] 90% of the wealth” even mean?
“I love watching people like you argue for the end of a tax that will never impact you in order to benefit a class of people who will never have anything to do with you. Sucker.”
Once again, Max, your lame attempt to drag the debate down to a personal level by making assumptions beyond your competence demonstrates nothing but your own ignorance.
June 7th, 2006 at 9:12:04 pm
I don’t have time to read all the comments, so I’ll simply focus on the errors in Dane’s post (and his links).
Today, specifically I’m talking about the estate tax and the 18 families that have spent ten years lobbying to save a combined 1 trillion dollars on their taxes.
That’s incorrect. The 18 families referred to in the article would only save $71 billion per your article. That’s a far cry from a trillion bucks.
Those who argue for repeal say the estate tax discourages entrepreneurs. What? Passing on $4 million tax free to your kids is not enough incentive?
This response completely ignores the point of the argument. Aside from the fact that this $4 million has already been taxed as income, it is largely untrue that the $4 million is being passed as cash to unworthy heirs. Much more often than not, the $4 million is composed of assets, such as houses, property, farms, and businesses. Suppose California real estate continues its skyward climb and my parents house (now worth $1.2M when they bought it at ~$400k just over a decade ago) and net assets (worth, e.g., $2M) balloon to $4M by the time they die. If my parents were to leave me their assets, I’d have to pay a nearly $2M tax bill just to keep them! More likely, I’d have to sell some of the assets to pay the tax bill.
Similarly, a great many small businesses and farms are worth in the low millions of dollars. If the business founder and owner (or farmer) wishes to pass his $5M business on to his child, he’d have to pay over $2M in taxes. How is that fair? Even if in your lopsided view of the world you can construe that as being fair, such taxation is absolutely lethal to the entrepreneurial spirit of this country. Really folks, $4M is nothing in business valuation. If you want to lobby for keeping the estate tax, it’d be at least much more reasonable to raise the cap to something like $100M instead of just at $4M, and 45% is damn punitive. If anything, the estate tax should be no worse than the capital gains tax, which is currently 15%.
My position is pretty simple: Eliminate all estate, capital gains, and income taxes altogether (or at least have them come into effect only for people whose income is in the top 1%), and simply tax consumption via some sort of VAT. Exemptions, credits, and tax rebates can very easily be implemented for lower income households who buy little besides gas and groceries.
June 7th, 2006 at 9:19:00 pm
Joe Mama - you beat me to it !
I was noticing how the D-list give their emotive straw-men examples of statistics pulled from thin air, and the A-list are responding and initiating with cites which can be verified …
I know which *I* find more convincing …
June 7th, 2006 at 9:33:13 pm
More evidence that your guys’ arguments against the death tax are specious:
If nailing the super-rich is your aim, the death tax is a pretty dumb and inefficient way to go about it, which also harms us economically by nailing mostly successful entrepreneurs.
June 7th, 2006 at 9:33:47 pm
Apparently that link didn’t work, so here it is again
June 8th, 2006 at 12:32:06 am
What an amazingly long 14-hour old thread. I can’t possibly comment on all the thoughts that ran through my head throughout the last 63 comments but there are two that I’d like to touch on.
Mad Max, your “sucker” comment aimed at Joe Mama came across as if you were saying, “C’mon, let’s stick it to the rich people and steal their money. We’ll never be rich enough for it to affect us.” The question is what would you advocate if you WERE in the top 1%? If you had paid 40% of your your income in taxes over your career, retired, and passed away leaving a $20 million estate why should it be taxed again? If you’ve paid your “fair share” in taxes as you’ve earned your income the government should have no further claim on it. I think the objective should be to make sure everyone pays their “fair share” as they earn it. Defining that should be where all this effort should be going. I think the inheritance tax is only to compensate for perceived imbalances in the tax system that allowed the creation of the inheritance.
David probably offered the only new elements to this argument that I hadn’t thought about before and now realize I agree with. Although he didn’t offer the examples Bea requested I still think he has a good point. The saying, “You have to have money to make money.”, came to mind. How many of these programs are the lower level wage-earners able to fully utilize? Doesn’t it make sense that the richest 10% will make full use of these programs and no other taxpayers will save more money than them? So who does the program really help? And this is especially true with the more complicated programs that make our tax code as large as it is. The richest 10% can afford the experts to advise them how to maximize these opportunities while the low-end wage-earners likely miss out on what they would have been entitled if they had only known.
That said, I’m still wary about completely doing away with all loopholes. The idea of awarding a taxbreak if someone invests capital in an industry that is less profitable yet is needed in society seems like a good incentive. Maybe losing it wouldn’t be too bad if the whole system could really be “fixed”.
June 8th, 2006 at 2:59:38 am
Andrew,
“My position is pretty simple: Eliminate all estate, capital gains, and income taxes altogether (or at least have them come into effect only for people whose income is in the top 1%), and simply tax consumption via some sort of VAT. Exemptions, credits, and tax rebates can very easily be implemented for lower income households who buy little besides gas and groceries.”
As a side effect this would also help with part of the problem with illegal workers. Taxing their consumption would force them to pay their “fair share” of taxes and they would be ineligible for their exemptions, credits and rebates until they became legal residents.
June 8th, 2006 at 4:55:10 am
Following Andrew’s example of the family farm, many middle class folks not only accumulate assets that are not liquid, but also the source of their income!
Take his example of the family farm, perhaps valued at $5 MM. The value of the farm could be driven by the opportunity cost of the land, it could be a real estate value.
In any event, the $5 MM is a balance sheet number; the real question to the farmer is, how much do I earn in income per year from this asset?
If the $5 MM is inflated by the replacement cost of real estate, that is to say the actual land is only worth $2 MM in another market, that would still have no effect on the oranges and pomegranates being grown on the land.
So a $5 MM asset, based on real estate, might only generate $80,000 in income to the farmer, which is not a great return on $5 MM but not terrible on $2 MM.
So you can see where the haters are coming from on this thread. Slap that bastard’s kid with a 40% death tax, make him sell over 40% of that property to a developer, and send his income from $80,000 a year to $48,000 a year.
To argue that the death tax is an instrument to stick it to the man is in many instances to identify yourself as a Michael Moore stooge.
June 8th, 2006 at 7:27:22 am
Wow… don’t I feel special… ;-)
June 8th, 2006 at 7:56:09 am
dcl -
You should be proud. Been a long time since we’ve had a discussion thread this content rich. And on TAXES no less. :-)
June 8th, 2006 at 8:22:07 am
Wonderful! I had a part 2 to the farmer story, and wasn’t going to throw it out there, but now I will. Here goes…
So the naysayers respond to the farmer case and say, yeah, Jazz, fine the farmer gets screwed by the estate tax. But what about the uber-rich? What about Warren Buffett? Shouldn’t we stick it to the man? If we don’t, we’re big-time suckers, right?
As an aside, this image of the uber-rich is usually accompanied by a cartoon figure, straight out of Scooby-Doo, rubbing his hands together and, in the case of Buffett, jealously guarding a couple of trash bags with $50 billion in them.
In reality, Warren’s $50 billion is almost all in his life’s work, Berkshire Hathaway. Say he is $45 billion invested in Berkshire, which has a market cap of $140 Billion. So Warren owns roughly 1/3 of the compnny.
The other $95 billion of market cap is concentrated in comparatively few hands, as you know the share price is $90,000 due to Buffett never splitting the stock. Indeed, much of Berkshire is in the hands of original investors who put up $10,000 50 years ago (and now have around $100 million for their $10,000 investment).
What does Berkshire do, you say? Many things. Owns textiles and manufacturing concerns. Acts as a hedge fund, sometimes. Has large stakes in a few big companies.
Oh, and they own GEICO. Come to think of it, they’re also the worlds biggest re-insurer with General Re(insuring insurance companies).
Why does this matter? Suppose we took Mad Max’s advice and stuck it to Buffett for accumulating all this wealth. We would be suckers otherwise, right?
So, when Buffett dies, we’ll sock him with a 40% tax on his assets. And all the other old holders of Berkshire worth several hundred million cumulatively, bust them up at a 40% rate too.
The end result of which? The US government quickly becomes the majority shareholder in Berkshire Hathaway!
Which, if you think about it, is positively hilarious! The US government owning the world’s biggest re-insurer? That sounds positively grand. Given the government’s long and honorable record managing risk, I am sure they will do just fine by the remaining shareholders!
One other thing - Max condescended somewhat at our naivete at letting Buffett keep his money. But flip the argument: how honorable is it, Max, to say to Buffett, on his deathbed:
“Thanks for a lifetime of hard work. Thanks for infusing so much capital into the economy. Thanks for being such a great entrepreunerial role model for millions.
Now fuck off and die while we (the govt) destroy it all”.
I’d much rather be thought of as naive by Max then support the dishonor of the scenario above.
June 8th, 2006 at 8:23:56 am
Dammit! Stream of consciousness lets me down again. US government would obviously not become a majority shareholder, as they could get a limit of 40% of the shares - but they would be the largest shareholder, without a doubt.
June 8th, 2006 at 8:45:40 am
Lojo… not just taxes, tax policy and 70 comments… I’m not sure if there is a dryer subject that has ever gotten this many comments on this blog…
At this point I’d like to perhaps shift gears a little. Weather we do or don’t like the estate tax. I was thinking general thoughts on tax policy and how to restructure it so it, you know, actually works?
A friend of mine once suggested creating a Fed like organization that would be responsible for setting fiscal policy and that would be submitted to Congress for an up or down vote. Theory being that you strip some of the politics out of the tax code, and perhaps get some logic into it. Kind of like how BRACC made some military restructuring possible that could not have happened otherwise.
However, I’m not really sure it would work in this case. But I do think a simplified system where it is easy for people to see where the money they are paying in is going and that they feel it fairly quickly when more money goes there is an effective way to get people to better understand the decisions they are having the government make.
June 8th, 2006 at 9:07:22 am
Andrew,
Wouldn’t you/the farmer’s kids only have to pay taxes on any assets about the 4 million dollar mark? So that would mean, if they leave you 5M of assets, you/ the farmer’s kids would only need to pay $450,000? Granted, still a lot of money, on already taxed income, but much less than over $2M.
June 8th, 2006 at 9:13:11 am
dcl - want people to feel it fairly quickly? Force the government to balance the budget. That would make these huge spending overruns pretty painful, pretty fast.
June 8th, 2006 at 10:18:36 am
Kat, and how do you come up with 450k? If your assets are not liquid, if your asset is the farm, you kinda have to sell the farm to come up with the 450k, no? Maybe you can sell your home and golive in the farm, so you can pay the tax.
June 8th, 2006 at 10:19:37 am
dcl. back to the family privacy thing. You were reading someone else’s post. I did not say my family would be affected, nor did I go to USC.
June 8th, 2006 at 12:10:07 pm
DCL, that was AJ who wrote the USC thing, not 4-7.
To the anonymous poster, if you are questioning my math, 5M- the 4 Million Cap = 1 million, 45% of that is 450k.
That is the recipient’s tax obligation. Whether they sell their house, farm, or anything else to do it, I did not address in my post. I was merely correcting Andrew’s assertion that the tax obligation would be over 2 million dollars, because he neglected to mention that the 45% tax only applies to anything over 4 million dollars (or 2 million for singles). I did not try to bring feasability or anything else into it. I was mentioning that the tax only applies to the balance of the asset worth over 4 million, which in the 5 million example is 1 million dollars. That is all.
But, since you bring up selling the farm, in the NPR article I believe, is mentioned that it is hard to find a farm or small business worth over 4 million dollars. Also, I read today that no farms have been sold ever to pay an estate tax bill. If I can find the article again, I will post it, but in the meantime, if anyone can find me one example of a farm being sold to pay an estate tax bill, let me know and I will eat my words.
Also, while I disagree with the estate tax because I find it as double taxing, I wonder why all this talk that makes it seem like these people inheriting this much money will go homeless paying a tax bill. Yes, it’s a lot of money and whether it’s fair is debateable, but if you are getting 4 or 2 million dollars plus, and obviously come from a wealthy family, I doubt that you are going to be homeless paying this tax bill or suffer any real hardship. I guess it could happen, but I doubt with any frequency. Certainly not any more than the average Wal-Mart worker suffers hardship because they are short 100 a month with what Uncle Sam takes out of their check. And remember, less than 2 percent of Americans had to pay the estate tax at all last year.
To sum up, I was initially just correcting an incorrect statement without expressing opinion. Now I am saying I don’t like the estate tax as it is now, but I doubt that it’s making people lose farms and houses on any kind of widespread basis.
June 8th, 2006 at 12:26:54 pm
ahh, well now don’t I feel sheepish… Bad joke… old joke… yes I know, thank you, I’m here till Thursday–oh…
June 8th, 2006 at 12:41:10 pm
http://www.cbpp.org/5-31-06tax2.htm
That link, while not mentioning specifically that no farms have been ever sold, further bolsters my point that assets are rarely, if ever, actually sold because of the estate tax.
June 8th, 2006 at 1:07:37 pm
Kat, I do not have the time to go find a farm, but I do know of one guy who is paying a 850k bill because those were the taxes on his parent’s modest “estate”, which was really the family business. Now, this guy did not sell his house or his business to pay the 850k, but he is having to get creative in coming up with 850k so that he does not have to sell any of his current assets. Why can’t we make the estate tax kick in at a higer rate, so that small businesses and people who have worked very hard their whole life to build something don’t get screwed by a polic aimed at targeting the uber rich out of jealousy for their wealth and/or out of a belief in redistributive policies that not everyone agrees with?
June 8th, 2006 at 2:59:46 pm
Well, if he wants to keep the family business those are his options. Sell his assets or his business or maybe buy a more affordable house. It does suck to make a tough choice like that, but I’d prefer a choice like that over some of the choices much less wealthy Americans face every day. I do agree there are better ways of doing the tax code, and I don’t particularly care for the estate tax, but since the government has yet to show a way of making up the money lost by repealing the estate tax, it should stay until they find an alternative. Also, generally people who own a business and would like to avoid leaving their children a tax burden can find more loopholes in the forms of stocks, bonds, and “gifts”.
June 8th, 2006 at 3:58:42 pm
Kat, you dont get it do you? Just because poor people have it hard does not mean it’s less of a big deal when someone has to close their business or sell it, potentially screwing his employees. Kat, don’t make this about comparing the plight of different people in different socieconomic places in life. This is about what is fair in and of itself, and what is best for the economy, and not about how screwing the entrepeneurs is ok since the poor make minimun wage. Also, are you basically saying that only the suckers who do not use loopholes are the ones who get stuck paying the estate tax bill, so they might as well get shady and use those loopholes? great.
June 8th, 2006 at 4:01:06 pm
You seem like a nice, reasonable person, just trying to see all sides and please all people. But Kat, don’t let emotions control your argument, because you end up justifying someone’s misery with someone else’s misery.
June 8th, 2006 at 4:10:14 pm
I was just saying the loopholes exist. And I was not trying to say one plight was better or worse than another, but I can see how that was construed. It was not my intention.
June 8th, 2006 at 4:43:21 pm
Actually, Kat’s argument seems to overlook an important point: where does the money come from to pay an enterpreneur’s salary?
Consider the following:
Suppose a bright young law graduate takes a job at a firm, at a salary that progresses from say $150K/yr to $1,000K+/yr.
The firm recoups that investment because the lawyer is smart and she works lots of hours and generates lots of income.
However - what part of the income generated is due to the lawyer’s abilities and what part due to the firm’s reputation? Would the lawyer be able to charge/earn as much, if, equally smart, she worked for a less prestigious firm? Most likely not.
The prestige of the firm, then, is an income-generating asset.
So if those such as Kat think its “no big deal” for an entrepreunerial farmer to sell of 35% of his income generating asset, why not start taxing law firms when significant partners retire, if that significant partner is no longer able to benefit from the goodwill that they (and the firm) were using?
Again: if a particularly influential partner dies/retires from a firm, and the firm prospers from the benefit of the reputation that partner gave to the firm, why not tax the incremental fees the firm charges due to its enhanced reputation?
Why not? Because its completely outrageous!
So is forcing the entrepreneur to sell his land, for approximately the same reason.
June 8th, 2006 at 6:07:57 pm
I’m not sure where the 35% number comes from, or that people such as me apparently think it is no big deal for a farmer to sell 35% of his income generating asset. Well, it would technically be the farmer’s heir, who may or may not be a farmer themselves doing the selling. Also, as I’ve shown the likelihood of this happening is slim to none, and as far as I can tell no farms have ever been sold to pay a tax bill, and very few businesses have been sold. I’ve tried to make it clear that I would find it unfortunate if it happened.
I do not like the idea of double taxing income. I agree with your lawyer analogy, Jazz, the concept of the estate tax is very outrageous. But at this time the government has not presented a suitable replacement for the money that would be lost by repealing it.
I’m starting to feel like I’m going in circles now, so I’m going to bow out of this debate. Before I do, I shall leave you all with some humor. And I mean it as humor, not an insult on anyone. Obviously, since I’m on here debating too. My husband just showed it to me cause he saw me getting worked up about all this, and it felt good to step back and laugh about this.
http://www.clint.ca/argue/
June 8th, 2006 at 6:11:56 pm
But at this time the government has not presented a suitable replacement for the money that would be lost by repealing it.
Why must changes in tax laws be revenue-neutral? That might make them more appealing to liberals, but what’s wrong with decreasing government revenue and the corresponding scope of work the government increasingly controls?
June 8th, 2006 at 6:31:25 pm
Kat,
I hereby argue with your view of arguing on the internet. The arguing is the fun of this place, frankly. A bunch of often pseudonymous folks letting their thoughts loose on a variety of topics.
For me, the issue in this case is that I am mostly opposed to the estate tax, but I am willing to listen to alternative ideas. Your comment about where the tax dollars might otherwise come from is well noted - but I am a bit more like Andrew, in that I’d say cut the spending if the govt’s got a problem with revenues.
In conclusion, the people who argue back here may not be the smartest folks around, but if you want to get your information from experts only, realize that the experts often don’t have to answer to their opponents.
I’ll take debate over ‘expertise’ any day of the week.
June 8th, 2006 at 8:43:48 pm
Sorry that came across rudely. Meant “the people back here may not be experts necessarily” instead of the insinuated stupidity of “the people back here may not be the smartest folks around”.
June 8th, 2006 at 10:27:44 pm
Since I am unable to be active here during the day, my interest in this topic found it’s way into an actual face-to-face discussion with a friend. He made the point that the double taxation argument was a bit of a misnomer. The income was taxed when the parent earned it. When the parent passed, he/she was not taxed a second time. His/her heir was taxed as if it were newly earned income to them.
From the perspective of the family the wealth is certainly being taxed twice but that is because it is being treated as income twice. I still feel treating it as income the second time is unfair. Why should a person not be able to distribute their fortune as they desire when they pass on? It still feels like a mechanism to make up for what the income tax system missed the first time around. I prefer the system be fixed and the estate tax eliminated.
I also found that local farmers in my area are joining a recent trend to develop their croplands into housing developments. It seems many of them are awaiting the outcome of this debate before committing all of their land to being developed. The feeling is that, in the event of their passing, the estate taxes would be lower on property assessed as farmland than it would on dozens of $200k homes in the midst of construction.
June 9th, 2006 at 2:33:01 am
Lost in all these silliness is the fact that by 2011, the estate tax will revert to taxing an estate worth $1 million or more. I don’t know about you, but my parents house is worth that much now thanks to California ridiculous real estate boom. Imagine me being taxed 45% of that? That’s a nonrevenue producing property. I’d have to sell the house, so much for the middle class dream of leaving something for your kids. Oh, before anyone gets too high and mighty, when my parents bought the house, it was worth $200K.
With all these discussions about the $4 million exemption for married coupled, $2 for single, remember that’ll be gone by 2011. So, enjoy screwing the 1 percenters while you can.
June 9th, 2006 at 2:36:13 am
but what’s wrong with decreasing government revenue and the corresponding scope of work the government increasingly controls?
Andrew, I didn’t think small-government Republicans existed anymore, especially with the way the GOP’s been operating lately.
June 9th, 2006 at 6:11:40 am
Andrew, I would agree with you except for the fact that no one seems willing to make the necessary spending cuts…
June 9th, 2006 at 7:12:06 am
Why do small government Republicans not exist?
a) Most people can’t fathom the impact of deficit spending
b) Handouts to special interests buy votes, whether Democrat, Republican…or Libertarian, probably.
c) The rich will ultimately have to pay the bill, as the middle class (read: masses) are undertaxed (because if the middle class/masses were proportionally taxed, the high spending govenment types would get booted out of government by the middle class’ sheer, pissed off, numbers).
In conclusion, to the Angriers and Maxs and Davids who think the rich should pay even MORE taxes than they already do -
- what would be the end result of the middle class shouldering EVEN LESS of the US tax burden?
Inevitably, the result would be even greater government bloat.
Does anyone look forward to that?
June 9th, 2006 at 7:14:18 am
Said another way, the only realistic way to keep a check on government waste is to ensure that the support of government activity is shouldered by the greatest number of voters possible.
Asking the majority of US taxes to be paid by a small minority of super-rich virtually guarantees irresponsible, non-representative government.
June 9th, 2006 at 9:16:10 am
Jazz, I think your opinion on this matter is incorrect. But as it is an opinion, my disagreement is irrelevant in terms of persuasion. Simply stated, the facts are not on either side, as the statistics can be manipulated a billion ways to sunday.
June 9th, 2006 at 11:21:57 am
Good post, dcl, and as you note, the facts are not empirical so its hard to say.
But. I still think I’m right.
What’s more, like so many cultural phenomena that hint at underlyings (but not provably so), I think my idea could become famous.
Think about it: a chapter in Freakonomics 2? Why the middle class not paying taxes is related to governments behaving irresponsibly?
Ok, maybe not. Not many would buy the book that says the average Joe should pay more taxes.
Still, just in case its popular, I’ve already invented a catchy slogan:
“Representation without taxation”.
Whaddya think?